Question 1

Starbucks acquired the baker chain, La Boulange, with the intention of selling the bakery products at its coffee cafes. The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

Accepted Answer

A) True 
 B)False

Question 2

Antitakeover defenses are always a management ploy to protect their own self interests.

Accepted Answer

A) True 
 B)False

Question 3

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation, it must at least create superior customer value and it must be difficult to imitate.

Accepted Answer

A) True 
 B)False

Question 4

Transaction costs include all of the following costs except

Accepted Answer

A) agency costs. 
B) negotiating costs. 
C) search costs. 
D) monitoring costs.

Question 5

Portfolio management should be considered as the primary basis for formulating corporate-level strategies.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not part of a good guideline list for managing strategic alliances?

Accepted Answer

A) establishing a clear understanding between partners 
B) not shortchanging your partner 
C) relying primarily on a contract to make the joint venture work 
D) working hard to ensure a collaborative relationship between partners

Question 7

Diversification initiatives must be justified by the creation of value for shareholders.

Accepted Answer

A) True 
 B)False

Question 8

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Accepted Answer

A) True 
 B)False

Question 9

Divesting of businesses can accomplish many different objectives, except

Accepted Answer

A) enabling managers to focus their efforts more directly on the core businesses of the firm. 
B) providing the firm with more resources to spend on more attractive alternatives. 
C) raising cash to help fund existing businesses. 
D) dispersing manager focus.

Question 10

If a multinational firm fails to effectively integrate their acquisitions, this can result in

Accepted Answer

A) cost savings. 
B) divestiture. 
C) expansion. 
D) further acquisition.

Question 11

Vertical integration is attractive when

Accepted Answer

A) internal administrative costs are higher than transaction costs. 
B) transaction costs and internal administrative costs are equal. 
C) transaction costs are higher than internal administrative costs. 
D) search costs are higher than monitoring costs.

Question 12

Greenmail is an offer by a company, threatened by takeover, to offer its stock at a reduced price to a third party.

Accepted Answer

A) True 
 B)False

Question 13

Former Merrill Lynch CEO John Thain gave out 4 billion USD in discretionary year-end bonuses just before the company was rescued by Bank of America. This practice demonstrates managerial greed.

Accepted Answer

A) True 
 B)False

Question 14

Benefits derived from horizontal and hierarchical relationships are mutually exclusive.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a reason for merger and acquisition failures?

Accepted Answer

A) The acquiring company pays a premium for the common stock of the target company. 
B) Top executives act in their best interests rather than those of the shareholders. 
C) The acquired company assets are poorly integrated into the acquiring company business lines. 
D) The acquisition leads to value creation.

Question 16

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.

Accepted Answer

A) greenmail 
B) a golden parachute 
C) a poison pill 
D) scorched earth

Question 17

Risk reduction by itself is usually a means to create shareholder value, regardless of the overall diversification strategy of the firm.

Accepted Answer

A) True 
 B)False

Question 18

The term golden parachute refers to

Accepted Answer

A) a clause requiring that huge dividend payments be made upon takeover. 
B) pay given to executives fired because of a takeover. 
C) financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it. 
D) managers of a firm in a hostile takeover approaching a third party about making the acquisition.

Question 19

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Accepted Answer

A) True 
 B)False

Question 20

Related diversification enables a firm to benefit from horizontal relationships across different businesses in the diversified corporation by leveraging core competencies and sharing activities.

Accepted Answer

A) True 
 B)False

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

Starbucks acquired the baker chain, La Boulange, with the intention of selling the bakery products at its coffee cafes. The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

Antitakeover defenses are always a management ploy to protect their own self interests.

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation, it must at least create superior customer value and it must be difficult to imitate.

Transaction costs include all of the following costs except

Portfolio management should be considered as the primary basis for formulating corporate-level strategies.

Which of the following is not part of a good guideline list for managing strategic alliances?

Diversification initiatives must be justified by the creation of value for shareholders.

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Divesting of businesses can accomplish many different objectives, except

If a multinational firm fails to effectively integrate their acquisitions, this can result in

Vertical integration is attractive when

Greenmail is an offer by a company, threatened by takeover, to offer its stock at a reduced price to a third party.

Former Merrill Lynch CEO John Thain gave out 4 billion USD in discretionary year-end bonuses just before the company was rescued by Bank of America. This practice demonstrates managerial greed.

Benefits derived from horizontal and hierarchical relationships are mutually exclusive.

Which of the following is not a reason for merger and acquisition failures?

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.

Risk reduction by itself is usually a means to create shareholder value, regardless of the overall diversification strategy of the firm.

The term golden parachute refers to

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Related diversification enables a firm to benefit from horizontal relationships across different businesses in the diversified corporation by leveraging core competencies and sharing activities.